Editorial Analysis || Pause, refresh: on the GST Council focus on MSMEs

Mains Paper: 2 | Governance

Prelims level: GST Councils.

Mains level:  The GST Council does well to focus on the concerns of small firms.

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Context

• GST is an indirect, multistage, destination-based tax levied on every value addition.

• The Goods and Services Tax Council on the 5th of August.

• This time there were no rate changes.

• The Council’s focus at its latest meeting was on issues facing micro, small and medium
enterprises (MSMEs).

The Constitutional Framework

• Article 279 (1) of the Indian Constitution states that the GST Council has to be
constituted by the President.

• GST Council is a joint forum for the Centre
and the States.

• It consists of the following members:

• The Union Finance Minister, chairperson.

• The Union Minister of State in charge of Revenue of Finance.

• The Minister in charge of finance or taxation or any other Minister nominated
by each State government including Delhi and Puducherry.

• Costs for the council are completely taken care of by Central Government.
The meetings of the GST Council has a quorum of 50 percent
Decisions can be taken with at least three-fourth weighted majority voting for a resolution.

• The centre has have one-third of the votes.

• The states together have two-thirds of the votes.

How GST is benefitted to India in MSME Sectors?

• GST has expanded India’s tax base and brought more companies into the formal
economy.

• Revenues have reduced after peaking at ₹1.03 lakh crore in April.

• The rate cuts on several items in the last Council meeting came in to effect from July
27 so the full impact on revenue collections will take more time.

• The revenue loss from the most recent tax cuts may even lead to 0.04-0.08% of GDP
loss annually.

• However, this is marginal and may be compensated by stronger consumption growth and better tax compliance.

Following measures need to be taken by Govt.

• GST council has set up a ministerial group to look into the problems faced by MSMEs since India moved to the GST regime last year.

• This sends a signal that the government is willing to tackle the implementation issues
that still trouble smaller players.

• Companies with an annual turnover of less than ₹5 crore constitute 93% of the
registered taxpayers under the GST.

• In the previous meeting, the Council had decided that such companies no longer need to file complex returns every month, but only on a quarterly basis.

• The ministerial panel may recommend further easing of compliance for micro firms far less than ₹5 crore and enhancing the ₹50,000 cap for mandatory use of e-way bills to track the movement of taxable goods.

• The Council meeting used the consensus-based approach to decisions.

• Some States had problems on the proposal to increase digital payments by offering a cash-back to consumers using RuPay cards or the UPI platform.

• Now States will volunteer to run a pilot programme and a final decision will be taken after a detailed evaluation.

• This indicates the Centre cooperative approach with States.

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